In this report we analyzed: WIFI, FFIV, ROKU, ATOM, NVDA, MSFT
Please note the glossary of terms and techniques here and here.here and here.
From the trades below, I am personally most excited about the trade setups with Roku and F5. I also like Boingo for the small caps and am cautious on Atomera, Microsoft and Nvidia. Feel free to ask questions in my chat room.
Beth wants to remind readers that Inseego can make a nice hedge should the coronavirus shutdowns resume. We own this company already. You can access the PDF and blog update here. Feel free to ask questions about this on the forum in her chat room.
Boingo (WIFI)
SummarySummary
- Potential Break Out.
- WIFI is building an encouraging base above the 200-day SMA, while at the same time, sellers seem to be drying up.
- The volume profile is supporting a real breakout, but the internals are not.
- We will wait for price to close above $15 before reinitiating – please note the downside risk of owning it before a breakout is confirmed and the risk of not owning it due to the rumors that it gets bought out below the $15 mark.
Key Price Levels to WatchKey Price Levels to Watch
- $15 – this is the only level that matters right now. A break above on heavy volume, and day’s closing price above this level will be an encouraging sign.
- $11.70 – a close below here and we have a failed base. This puts the green target boxes into play.
We have attempted two trades in WIFI over the course of our service. The first was tracking a cup and handle breakout that stopped out in March with a slight gain. The second one just stopped out when WIFI closed below our stop, which was the 55-day EMA (in red).
I want to point out that just because a setup failed, it does not mean that we don’t keep seeking new ones. In fact, some of my best trades came after being stopped out multiple times. The goal is to make our losses small and let out winners run. We never know when a break below a key level can lead to a small shakeout or a deep correction, which is why we lean towards being conservative on our entries.
That being said, I keep coming back to WIFI because of the structure of the price leading into the $15 resistance level again. Here are the encouraging signs:
- Note that WIFI has made 7 attempts to breakout over this level. There is a rule in technical analysis that the more times a support/resistance is tested, the weaker it becomes.
- Next, WIFI’s price action in relation to the volume pattern is bullish. As WIFI trends closer and closer to the $15 region, it has built a pretty strong base above the 200-day SMA with volume decreasing. In other words, it appears that the sellers are drying up.
- Finally, the 200-day SMA is finally starting to turn up.
However, regarding the internals, they tell a different story:
- The MACD is trending down and on the verge of breaking the 0 line.
- The RSI is also quite weak and coming dangerously close to breaking the 40 line.
- Most importantly, the Accumulation/Distribution line has made a series of lower highs each time WIFI has attempted to break out, suggesting that the buying pressure is fading.
We will watch the $15 level closely. A breakout above this level (again) on heavy volume will be our sign to get back in. I want to stress that we will wait for the price to close the day above this level.
Also, it’s worth pointing out the risks: (1) WIFI is a small cap growth story, which is prone to sharp moves. If it breaks the base it just built, the downside could intensify; (2) WIFI is a prime buy out candidate. This could happen below the $15 level and we could miss out.
F5 (FFIV)
SummarySummary
- Break out Alert
- F5 is still bottled up within its range.
- The RSI and CCI are showing strong signs of a breakout.
- F5 has built a solid base above key moving averages.
Key Price Levels to WatchKey Price Levels to Watch
- Above $153.50 confirms the breakout.
- Below $120 confirms a break down.
- A close below $127.90 will be the likely stop for this entry.
F5 Systems is giving a buy signal. If you look back at our original thesis, there are 2 potential counts at play, and until price breaks below $120 or above $153.50, we will not know for certain which count is active.
Based on what I’m seeing, I believe the more bullish count is more probable. First off, the RSI is above the 50 line on a 30 day look-back period, while the short term CCI is in oversold regions (-100). Also, note the positive divergence on the CCI. As price is making a lower low, the CCI is making a higher low.
This, coupled with the strong base FFIV has built above the 200-day SMA in black and the 55-day EMA in red, supports a potential move up.
We will look to go long on Monday with a very tight stop, in case we get a fake out. If confirmed, our target will be around $210.
Roku (ROKU)
SummarySummary
- Potential Breakout Confirmation is Close
- Roku is close to confirming the b wave is over and we are in the early stages of the final c wave, which is targeting up to $240, if confirmed
- A close above $131 should confirm this move.
Key Price Levels to WatchKey Price Levels to Watch
- $131 is the level to watch for confirmation
- A close below the 200-day SMA and the downward trend line (in red on the chart) suggests that the b wave theory we’ve been tracking is correct and we can expect to pick up shares in the $102 region.
Roku tagged our target box for a brief period two weeks ago. Unless you had an automated market order to buy at the $102 level, = you probably missed this pricing (as did we as it happened very quickly). Furthermore, we noted the positive divergence in price last week, and based on the structure, suggested that this would likely be the b wave within a larger b wave decline.
B waves typically retrace to the 50-61.8% retrace level. Today, Roku is at the 76.4% retrace level, which is the highest level I’ll give the b wave thesis before we look to go long. Furthermore, Roku is at a wall of resistance with the downward sloping trendline, the 200-day SMA, which is pointing down, and a confluence of important Fibonacci price levels.
If Roku can break above $131 and close above this level, I’ll abandon the b wave theory, and look to go long. This will also be the 3rd day that Roku closes above the trend line that has kept it bottled up for several months, which will be a show of strength.
We always prefer to catch a bottom in a stock. This is an incredibly difficult feet, which sometimes works against us. However, if the price upside targets in Roku are achieved that we are tracking, getting shares $30 above our target will not matter in the grand scheme.
Atomera (ATOM)
SummarySummary
- Risk of Correction.
- Atomera is tracking a complex/corrective uptrend.
- It is in the final throws of this uptrend, which suggests that the upside potential is limited, yet could extend into the $12.50 region.
- We will wait for a correction to add.
Key Price Levels to WatchKey Price Levels to Watch
- Resistance levels for a potential top: $11.10, $11.75, $12.55
- Support levels to confirm a top: $8.20 (a break below this price confirms a top).
Atomera is another small cap we are actively tracking for an entry price. Its structure is tracing a larger degree corrective uptrend – i.e., very overlapping vs. the more direct 5 wave impulse. If you note the green count on the chart, you’ll see what I mean. The B wave retraced the entirety of the A wave.
Then, the green C wave, which we are in now, has its own internal wave structure in blue. Note how the blue b wave overlapped the entirety of the blue A wave. This confirms that the current uptrend is part of an overlapping/complex move higher.
On a smaller time frame, C waves always unfold into 5 wave patterns, which is exactly what we have. If you follow the pink count, you’ll see this 5 wave structure that makes up the green c wave.
It’s worth pointing out that negative divergence in the MACD – as the price moves higher, the MACD does not. This is very characteristic of 5th waves. Also, the price is within a zone of major Fibonacci price clusters that are standard zones for a completed 5th wave.
Because this is such a clean 5 wave pattern, I’m having a hard time buying into ATOM right now. It may extend, but to me, the downside right now is greater than the potential upside.
Nvidia (NVDA)
SummarySummary
- Limited upside in the short term. Risk of correction is high.
- In its final 5th wave with heavy divergences.
- Within a cluster of price levels that will be significant resistance.
- We are waiting for a correction to add.
Key Price Levels to WatchKey Price Levels to Watch
- Resistance regions for potential top: $363 – $380, $407-$420
- Key supports to confirm a top: $325, $319
Since Beth first wrote about Nvidia, we have guided/made 5 entries into this stock. We are actively searching for the 6th today. The structure of Nvidia, in my years of tracking price structures in stocks, is without question one of the most complicated charts I’ve analyzed.
What I hope to do today is to explain why I’m holding off on a new position. First off, if we look at the daily chart, NVDA is tracing an ending diagonal pattern for its final 5th wave within a larger degree 5 wave pattern. An ending diagonal is a 5 wave pattern that traces a trend channel (in gray), and each of the 5 waves has an internal 3 wave pattern. This structure has us in the final 5th wave before a reasonable pull back.
This is also confirmed by the RSI and MACD histogram showing notable divergences. The momentum is fading as the price makes new highs. This is very typical of the final 5th wave.
We do believe that this pullback will provide a chance to pick up shares sub-$300, and we will have to see how it unfolds before making a reasonable range to target.
The above chart is the weekly chart of Nvidia going back to its IPO. Being a semiconductor play, its prone to extreme up and down moves, which has made its chart quite complex. I believe that Nvidia is charting a very large degree leading diagonal that is taking decades to play out. We are approaching the end of the 3rd wave, which can extend from what I can tell into the $415-$420 level. However, once this stock reverses, a very reasonable, and shallow retrace will be to the middle of the trend channel or the 200-week moving average in red.
I’m showing this price structure to so that you can see the context of the moves we are expecting. Though we do not believe we will see a retest of the March lows, a move into the mid-$200 is not unreasonable.
Stocks in great companies like Nvidia can get ahead of themselves. We believe it’s wise to be patient right now.
Microsoft (MSFT)
SummarySummary
- Microsoft is showing notable signs of weakness as it makes a slightly new high.
- We are expecting a pullback, which we will use to add shares.
- There is a potential for a double top, but it is the least probable scenario right now.
Key Price Levels to WatchKey Price Levels to Watch
- Resistance for potential top: $198-$201, $208-$213
- Key Support Regions to confirm a top: $190-$185
Microsoft’s chart is strongly suggesting a correction is due. Note the RSI and CCI diverging compared to the current price levels. Also, note the negative divergence in the RSI from the first top to now. This is a strong divergence that shouldn’t be ignored. Next the Accumulation/Distribution line is a fantastic leading indicator, which gives us an idea what smart money is doing. It’s trending down while the price is still trending up.
The price can still make higher levels with divergences forming. The blue region and the red region are likely resistance zones for this correction to trigger (please note the Key Price Levels to Watch above). The question remains how deep of a correction can we get in MSFT?
Using basic technical analysis, there is a real possibility for a double top reversal? A double top is exactly what it sounds like. From an Elliott Wave standpoint, this double top would be a b wave within a much larger corrective pattern. If true the C wave down would take us right back to the key $135 support.
However, many things must happen before this scenario becomes a probability. First off, MSFT has to break the 20-day EMA in blue, which has held the price up on its current uptrend. It would then need to break the 55-day EMA in red and the $175 region. Next, to confirm the double top thesis, the $165 region would have to give, followed by the 200-day SMA, which would not be far from this region.
We do not believe this is the most probable scenario. Instead, we believe the correction will likely bottom within the green target box before turning back up. This will set up a large degree cup and handle to new highs.
However, with the double top reversal on the table, we will be cautious in how we add shares in the coming correction.